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Credit Suisse Sued by DZ Bank Over Mortgage Securities

March 19 (Bloomberg) -- Credit Suisse Group AG,
Switzerland’s second-biggest bank, was sued by a clearinghouse
for German cooperative banks over $138 million in residential
mortgage-backed securities.

DZ Bank, based in Frankfurt, filed the suit yesterday in
New York State Supreme Court in Manhattan. One of two clearing
organizations for Germany’s cooperative banks, it has sued other
banks in the same court during the past two years, including
JPMorgan Chase & Co. and Bank of America Corp., the two largest
U.S. lenders.

Yesterday’s filing accuses Zurich-based Credit Suisse of
making “material misrepresentations and omissions” about the
underwriting standards used to issue the mortgages that were
pooled into the securities, the transfer of the loans to trusts
and their legal rights to receive payments on the loans.

“We will vigorously defend against this latest attempt by
a sophisticated investor to improperly shift alleged losses to
Credit Suisse,” Drew Benson, a spokesman for Credit Suisse in
New York, said in a statement.

DZ Bank, the largest issuer of structured notes in 2012, is
enjoying the best start to a year for sales of the securities,
even as the market slumps to a nine-year low.

Structured Notes

The lender sold $5.2 billion of structured notes so far
this year, up from $3.9 billion over the same period last year
and the most on record, according to data compiled by Bloomberg
dating back to 1999.

DZ Bank is one of two clearing organizations for Germany’s
cooperative lenders, allowing it to sell structured notes
directly to more than 900 institutions. That’s helping it
maintain sales as the market shrinks. Demand for the securities,
which package debt with derivatives, is waning as regulators in
the U.S. and Europe warn about their complexity and lack of
transparency, and as record-low interest rates limit returns.

Still, the risks associated with structured notes promise
higher yields than basic bonds, and that’s driving strong demand
for the securities, said Rainer Overbeck, head of structured
credit trading at DZ Bank in Frankfurt.

The case is Deutsche Zentral-Genossenchaftsbank AG, New
York Branch, v. Credit Suisse Holdings (USA) Inc., 650967/2013,
New York State Supreme Court, New York County (Manhattan).